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QuestionHow might Cadbury decide which products it might need to discontinue?
AnswerThere are several occasions when a company may decide to discontinue a product - we can discuss some of the most common here. The main reason for discontinuing a product is that it may no longer be profitable, this could happen due to cost increases, demand dropping or price falling (due to competitors). At Cadbury they must also take into account seasonality in demand. This raises a second reason: for companies where demand is seasonal they may discontinue and later re-continue products to match the seasonal cycle. For Cadbury an ideal example is Easter eggs, although building up stock will take time, it is unlikely to take a full year. They may instead retool a production line to focus on other products. Besides profitability, another reason may be strategy. The company may decide that they are better off producing a different product regardless of if the one discontinued is profitable or not. This could be because they have an alternative that is more profitable, or because they want to change the direction of the firm. A further reason could be that the company is updating a product to a newer version. Cadbury frequently update their product line with new formulations or sizes. Although, the core products generally remain the same – so aren’t truly discontinued. A final common reason for discontinuing a product could be that there are frequent and unresolved quality issues with a product. It may be considered too expensive to be worth solving, or may have damaged the reputation of the product to a point where it is no longer viable. When discontinuing any product, it is important to consider the full product portfolio and the knock-on effects that may occur. It is sometimes best to keep unprofitable products if they contribute to generating overall demand for other products.
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